Can the CMA make us see our market folly?

By Kathy Evans | 12 May 2021

The Competition and Markets Authority (CMA) is conducting a major investigation into the market for looking after children in England, Scotland and Wales. It was triggered at the request of Josh MacAlister, chair of the English Care Review, following previous calls for a CMA investigation from the Housing, Communities and Local Government committee and the outgoing Children’s Commissioner, Anne Longfield.

Many people in the sector, myself included, have questioned whether the CMA is the right body for the job, given that its usual remit is to make commercial markets more open and competitive, rather than being an authority on making public services better for children. Recently, however, I’ve been wondering whether they might offer exactly the authoritative view that’s needed.

At Children England, the membership body for children’s charities, we have been raising the alarm about treating care as a competitive market for longer than any of our current staff have been here. Market thinking and transactional approaches to the procurement of care for children have been an accumulating disaster more than 30 years in the making. Many council colleagues I know, who entered their current roles long since the procurement marketplace became the norm, struggle to understand how we ended up here too.

Councils hold all the duties and budgets for care, so should – in theory at least – feel fully in control of what care is commissioned. Instead of feeling in control of it, however, too many feel they are now victims to the marketplace. In residential care for children, councils collectively own only a fifth of the provision they need, leaving them heavily reliant on a private sector increasingly dominated by three huge private-equity financed companies, growing their market share (ie market power) as they acquire smaller companies. The private sector’s business models mean much of that care provision is built on huge amounts of debt. The Local Government Association’s two reports on profit-making and risk in independent children’s services (in 2020 and 2021) – detailing this dangerous trend towards debt-fuelled consolidation in the care market – must be essential reading for the CMA.

A decade of rising care numbers hasn’t been matched with public investment to create more capacity to care for more children. Quite the contrary, the decade of swingeing cuts to councils’ spending power has left many commissioners feeling unable to do much more than go retail shopping for care, overspending their budgets, spot-purchasing one bed at a time from whatever vacant care capacity can be found, even if they know it’s not what that child really needs. Insufficiency is driving panicked placement-chasing, rising out-of-authority placements and the use of unregistered and unregulated settings. And the people who pay the price of all that market failure are children.

The Chartered Institute of Purchasing and Supply, in their procurement glossary, give the following definition of market failure: ‘Market failure occurs when the action of the market does not create an optimal outcome. Causes of market failure can be attributed to three main reasons: first, market distortion ie monopoly or oligopoly, where market power is concentrated in the hands of a few participants. Second, the market creates an ‘externality’ that is not factored into the cost of production. Third, is a market failure as a result of the goods or services being a ‘public good’.’

All three of those causes of market failure are inherent in the provision of care. Care is not a product it is a verb, something people do, not a commodity to be traded. If care is inherently a market failure, trying to make it work better as a market can only make it worse.

It feels counterintuitive for me to hope that the CMA may bring decisive insight to our care market folly, when a litany of Department for Education stocktakes, reviews and market analyses have failed to. But I do harbour a quiet hope that the CMA could be precisely the right body to do it, not because they know about caring for children, but because they do know about markets – and care is not really a market at all. After conducting a thorough investigation the CMA should politely and metaphorically kick our ball back over the garden wall, tell us we have to find a more appropriate collaborative (non-competitive) game to play, and warn us never to go looking for ‘market solutions’ for children in care ever again.

Kathy Evans is CEO of Children England


You can view Children England’s submission to the CMA on the website

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